News

Alameda County ready to close Internet 'sweepstakes' cafes

By Ashly McGlone Hayward Daily Review

Posted:
01/23/2013 05:29:59 PM PST

Updated:
01/24/2013 12:28:12 PM PST

SAN LORENZO -- Less than a year after Net Connection Internet cafe opened its doors on Hesperian Boulevard, county officials are trying to close it and a string of similar businesses in unincorporated neighborhoods after the state declared them illegal gambling operations.

Net Connection sells customers Internet time and, in turn, access to online sweepstakes games for a minimum $5 fee. Payouts at Net Connection can reach $1,000, according to an online review of the operation. A private security officer stands guard outside the door.

A clerk behind the counter at Net Connection said the shop sells Internet time and nothing else. Net Connection management did not respond to a request for comment.

Similar cafes nationwide operate differently, with some offering customers the choice between standard Internet access or sweepstakes games after logging in with a paid Internet time card. Others offer sweepstakes time, credits or money as a promotion with the purchase of a soda, coffee, snacks or services like faxing. Sweepstakes games range from video slot machines to poker, roulette, and blackjack hosted on a local or remote software server.

Such establishments aim to skirt state gambling laws and are illegal, according to the state Bureau of Gambling Control. The bureau issued a law enforcement advisory on the topic in December and offered local governments assistance in shutting them down.

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The advisory gave the county the solid footing it needed to pursue the closures, said Supervisor Wilma Chan, who represents San Lorenzo. Chan's field office is located steps away from Net Connection.

"I think people in the community don't want a flood of certain types of businesses coming in and we can only regulate based on state law and other things," Chan said. "They call themselves Internet cafes, but they are really online gambling establishments."

The Alameda County Board of Supervisors issued a moratorium on new cafes in October while the planning department reviewed the cafes' operations. The review, finished late last year, concluded the businesses do not comply with the county's zoning ordinance since no business like it is listed as a permissible or conditional land use. The county supervisors voted to repeal the moratorium Jan. 8, saying it was now moot since closures were being pursued.

Alameda County has sent cease and desist letters to all five Internet cafes located in unincorporated areas, including two in San Lorenzo, two in unincorporated Hayward and one in Castro Valley, said Alameda County Sheriff's Sgt. Bret Scheuller, head of the area's community policing unit. All have been open less than a year.

"We get quite a few community complaints from residents and business owners, and they range from parking issues to loitering to illegal drug use and sales, so it runs the gamut," Scheuller said. "We are closely monitoring the activities of these places while they are still open. We have made arrests at all five of the ones we currently have."

County hearings for the businesses are next, and if sought, an appeal process, said Albert Lopez, planning director for Alameda County. Lopez estimates all issues will be settled and closed within 60 days.

The Internet cafe sweepstakes industry -- estimated to gross $10 billion a year nationally by a leading consultant to the sweepstakes industry -- has prompted legislative bans and legal battles in some states and efforts to protect the cafes in others.

Executives of Hest Technologies, a Texas-based company that makes software used in the cafes, were arrested in August and face charges of felony gambling, money laundering and organized criminal activity. In Florida, proposed legislation to regulate or ban them leaves their fate unclear.

In Contra Costa County, the cities of Antioch, Pittsburg and Oakley all placed moratoriums on the cafes last year, and Brentwood placed restrictions requiring employee background checks, limited hours of operation and prohibitions against adult-oriented business, among other requirements.

James Saavedra, owner of Papa Ponchos Taqueria, located in the same San Lorenzo complex as Net Connection, welcomes the planned closure.

Saavedra said he and five other tenants petitioned the landlord April 18 for help addressing the problems they said the cafe brought, including concerns about security, nuisances created by cafe clientele, trash accumulation and parking issues in the 20-minute lot.

"We as business owners have heard from our own 20-plus-year customers that they do not feel comfortable about coming into our stores," Saavedra said. "(The cafes) are deceiving. They tell the general public just what they want to hear. They are not truthful with what they are actually doing."

The board of directors for the Washington D.C.-based American Gaming Association, which promotes the interests of the entertainment gaming industry, voted in the fall to oppose the cafes.

Kathy Martins, interim administrator at the San Lorenzo Village Homeowner's Association, said the association has fielded numerous complaints about the cafes.

"We have two in a very small geographical location, and that was very concerning," Martins said, adding that the decision to close them, "really shows that the board of supervisors are in touch with the communities they govern."

Ashly McGlone covers San Leandro, San Lorenzo and the Washington Township Health Care District. Contact her at 510-293-2463. Follow her at Twitter.com/AshlyReports.